Philadelphia officials said yesterday the city's fiscal 1991 deficit could be more than $50 million below their earlier estimates of $219 million.

City officials said preliminay audits have found about $64.7 million of unexpected revenues and cost savings in last year's budget, which ended June 30. But a recent arbitration decision with city unions could swallow a big chunk of that amount.

The size of the city's 1991 gap and the projected $42 million shortfall for this fiscal year were among the major reasons the state Legislature established the city oversight board in June.

The board, known as the Pennsylvania Intergovernmental Cooperation Authority, plans to sell bonds this fall to cover the combined deficits and to provide the city with a cushion of cash until fiscal reform has a chance to take effect.

Bernard Anderson, the authority's chairman, said earlier this month that the issue would probably be at least $300 million and possibly much higher. Mr. Anderson was not available for comment yesterday. But David Brenner, the city's finance director, said the size of the issue will probably shrink in response to the new budget data.

"If our deficit turns out to be $40 million or $50 million less, it means a $40 million or $60 million smaller bond issue," Mr. Brenner said.

Mr. Brenner said the biggest reason for the improved budget results is the success of cost control measures implemented during the city's ongoing cash crunch. Philadelphia saved about $25 million, or 1% of planned city expenditures for this year, mostly by not filling job vacancies.

Another $24 million came from reclaiming unspent cash allocated to various city departments in previous years.

And city revenue collections were about $15.7 million better than officials expected at the start of the year.

On the minus side, however, is a recent arbitration decision against the city that is expected to cost about $46 million over two years. The drawdown on the 1991 budget will be about $21 million, but officials have already set aside $10 million in anticipation.

Mr. Brenner stressed that, because closing the budget for the year involves numerous adjustments and calculations, a final deficit figure for 1991 will not be available for about three more weeks.

But he said he released the preliminary results in order to make bondholders aware of continuing evidence pointing to the beginnings of a turnaround for the city.

Over the past two months, Philadelphia has successfully reentered the market for a short-term bridge loan and a bond-financed criminal justice complex. The city, assessed at speculative grade by the rating agencies, previously had been unable to secure financing in the public markets for almost a year, because of its chronic budget deficits and cash-flow crises.

"The real point is that we're moving out of the depths, and we've got another favorable set of developments," Mr. Brenner said.

He warned, however, that the local economy remains "soft," so the city's stringent cost containment measures will stay in place to ensure the current budget remains manageable.

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